All or Nothing? The U.S. Supreme Court to Address Whether Evidence In Support of Removal Must Be Submitted with the Notice of Removal

by K&L Gates LLP
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On April 7, 2014, the United States Supreme Court granted the petition for writ of certiorari in Dart Cherokee Basin Operating Co., LLC v. Owens, No. 13-719 (“Dart Cherokee”), to address whether a defendant must include evidence supporting the jurisdictional amount in controversy with its notice of removal of a state case to federal court, or whether a “short and plain statement of the grounds for removal” will suffice.[1] Resolution of this issue by the Court may have significant implications for any defendant seeking to remove a class action or a mass action from state court to federal court.

The procedure for removing a case from state to federal court is dictated by statute, and requires, among other things, that a defendant file a notice of removal “containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant.” [2] When interpreting the “short and plain statement” standard, courts in the Fourth, Seventh, Eighth, and Ninth Circuits have held that a defendant does not need to submit evidence with a notice of removal, because the notice is a “pleading,” similar to a complaint, which the defendant may base solely on allegations.[3] Similarly, courts in the First, Fifth, Seventh, Ninth, and Eleventh Circuits permit the consideration of evidence submitted in opposition to a motion to remand even if not presented in the notice of removal.[4] The Tenth Circuit, however, has not followed these other circuits. The Tenth Circuit requires that a defendant submit any evidence that in support of the removal at the time it files the notice, and bars a defendant from introducing evidence at the time of opposing a motion to remand.[5]

In Dart Cherokee, the defendants (collectively, “Dart Cherokee”) removed the state court class action pursuant to the Class Action Fairness Act (“CAFA”),[6] and alleged that each of CAFA’s elements was satisfied based upon the allegations contained in the complaint.[7] The plaintiff moved to remand the matter to state court, arguing that the notice of removal was deficient because it did not contain evidence to support Dart Cherokee’s allegations that the amount in controversy element was satisfied.[8] Dart Cherokee responded to the motion to remand with a declaration supporting the amount in controversy, including calculations substantiating the amount articulated in its notice of removal.[9] The district court held that under Tenth Circuit precedent, Dart Cherokee was “obligated to allege all necessary jurisdictional facts in the notice of removal,” and granted plaintiff’s motion to remand the matter to state court.[10] Dart Cherokee’s petitions for an appeal to the Tenth Circuit and a subsequent en banc review of the district court order were denied by divided panels.[11]

The Dart Cherokee appeal is now the third CAFA removal case that the Supreme Court will have heard in the last three years.[12] It is expected that the Supreme Court will clarify the pleading standard to be applied to CAFA notices of removal and address what a removing defendant must include in a CAFA notice of removal. Regardless of the outcome, the ruling could have a far-reaching impact on notices of removal—made under CAFA and otherwise—and could raise a number of issues for businesses and consumer financial institutions in litigating class actions. A ruling by the Supreme Court is not expected until sometime in the Court’s next term, which runs from October 2014 to June 2015. K&L Gates will continue to monitor the Dart Cherokee matter and will report on future developments on this important class action issue.

[1] Petition for Writ of Certiorari, Dart Cherokee Basin Operating Co., LLC v. Owens, No. 13-719, 2013 WL 6665192, at *1 (U.S. Dec. 13, 2013).

[2] 28 U.S.C. § 1446(a), (b)(1). The defendant must file the notice and attendant papers with the appropriate federal district court within the time periods specified by the removal statute.

[3] See Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 200 (4th Cir. 2008) (explaining that a notice of removal is “deliberately parallel to the requirements for notice pleading found in Rule 8(a)”); Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008); Hartis v. Chicago Title Ins. Co., 694 F.3d 935, 944-45 (8th Cir. 2012); Janis v. Health Net, Inc., 472 F. Appx. 533, 534-35 (9th Cir. 2012); Lowery v. Al. Power Co., 483 F.3d 1184, 1217 n.73 (11th Cir. 2007).

[4] See Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41, 46, 51-53 (1st Cir. 2009); Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000); Harmon v. OKI Sys., 115 F.3d 477, 479 (7th Cir. 1997); Cohn v. Petsmart, Inc., 281 F.3d 837, 840 n.1 (9th Cir. 2002) (holding that where additional evidence regarding removal is submitted in an opposition to a motion to remand, it should be treated “as an amendment to [the] notice of removal”); Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 773-74 (11th Cir. 2010).

[5] See Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242, 1246 (10th Cir. 2012) (requiring jurisdictional proof at the time of removal through discovery, calculations, settlement demands, affidavits, or expert testimony); Martin v. Franklin Capital Corp., 251 F.3d 1284, 1290 (10th Cir. 2001); Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995).

[6] CAFA provides jurisdiction over putative class actions (1) consisting of more than 100 class members, (2) whose claims, in the aggregate, exceed $5 million, and (3) in which any of the class members is a citizen of a state different from any defendant, unless at least two-thirds or more of the members of the class in the aggregate and the primary defendants are citizens of the state in which the action was originally filed. See 28 U.S.C. §§ 1332(d)(2), (d)(5)(B).

[7] See Owens v. Dart Cherokee Basin Operating Co. LLC, No. 12-4157, 2013 WL 2237740, at *2 (D. Kan. May 21, 2013).

[8] Id. at *3.

[9] Id. at *2-3.

[10] Id. at *4.

[11] Dart Cherokee Basin Operating Co., LLC v. Owens, 730 F.3d 1234, 1234 (10th Cir. 2013).

[12] See Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013) (class representative cannot avoid CAFA jurisdiction by stipulating to damages below the $5 million jurisdictional amount); Mississippi ex rel. Jim Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014) (state attorney general action brought on behalf of unnamed individuals not a “mass action” subject to CAFA’s removal jurisdiction).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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